A Strong Offense
A Stronger Defense
As corporate fiduciaries consolidate, merge, or otherwise combine with each other, trust departments are often tasked with administering trusts outside of their home state. For example, a trust department in Florida may, for the first time, end up administering a New York trust. Knowing which state’s trust law governs the administration of the trust is no small matter.
While corporate fiduciaries are usually well-acquainted with their home state’s trust code, they may not be as familiar with the trust codes and law that actually apply to that newly acquired trust relationship. As a result, trustees may inadvertently end up administering the trust under the wrong standards by simply assuming that the home state’s trust code applies.
This is another reason why it’s so important to read every word in the trust instrument. Even after reading the trust instrument, it’s then important to independently determine which state’s trust laws apply to the administration of the trust. Failure to do so may either subject the trustee to liability for deviating from the applicable fiduciary duties or prevent the trustee from raising more favorable law in the event that it’s been sued. The latter of which happened to the trustee in Corya v. Sanders.Roy Sanders was the beneficiary of several trusts that were established by various family members. Roy sued the trustee of these trusts, Doris Corya, for, among other things, failure to provide accountings for these trusts. Applying Florida law, the trial court ruled that Doris was required to provide the requested accountings.
Doris argued on appeal that the trial court erred in failing to apply New York law to two of the trusts. One of the trusts had a specific provision requiring that the trust be governed and construed under the laws of New York. The other trust, which was not in the record, was established in New York and, therefore, Doris argued that New York law applied to that trust, too.
Roy argued that Doris waived the right to rely on New York law because she did not raise it in the trial court and provided no New York law contrary to Florida law. Furthermore, Doris relied on Florida law in her trial court pleadings. The Florida Court of Appeals, therefore, agreed with Roy that Doris waived reliance on New York law.
That’s actually a pretty powerful ruling. New York trust law – especially as courts have interpreted a trustee’s fiduciary duties – can be very different from trust law in other states. The trust instrument specifically stated that New York law applied, but, because the trustee failed to timely claim that New York trust law applied, she was prevented from relying upon it.